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Remaking the Firm: How KM is Changing Legal Practice
To set precedent for best-practice, expert and collaboration systems, firms and lawyers must overcome hourly rate mindsets and other cultural barriers
Posted Dec 9, 2000
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A few years back, E.I. Du Pont de Nemours began a dramatic reduction in the ranks of his company's outside legal counsel. Today, the chemical giant has fewer than 40 firms on its roster, down from more than 350 in 1992. Among DuPont's caveats for the short-listed law firms- -aside from specific areas of legal expertise- -were provisions mandating fixed-fee arrangements for some matters and electronic connections between the company and the firm.

Detroit law firm Dickinson Wright not only made the grade, it got the message. DuPont wanted its legal advisors to get more efficient through the establishment of knowledge bases—to get flexible in the way that knowledge was packaged and applied, and to get wired for quick access from inside and outside the firm. And Dickinson did (see accompanying sidebar).

"I've been known to say that people who are unwilling or unable to visualize the future just aren't going to be around to participate in it," says Michael Harnish, Dickinson's chief information officer and winner of the 1999 American Institute of Certified Public Accountants award for achievement in technology. "Nowhere is that more true than in the legal profession. To stay viable, the legal profession must change the way it has done business for hundreds of years."

To achieve such change calls for the leveraging of technologies and knowledge assets to support the kinds of collaboration and innovation that translate into efficient, responsive services, Harnish says. Law has lagged behind other professional service sectors—and business in general—in these initiatives for a number of reasons, but the two most significant barriers are economics and culture. The economics issue is simple: Most firms still make their money the old-fashioned way—by billing hourly for it—so the promise of increased efficiencies that drove many other sectors toward KM a few years ago has held little sway in law firms.

Cultural barriers are less obvious, as firms have highly individual personalities. However, lawyers, as a group, have tended to be resistant to technology because their work processes are largely based on case law contained in bound volumes. Also, for territorial reasons, attorneys have generally shied away from widespread knowledge sharing with colleagues and have been motivated by the compensation structure to adopt a "me-first" attitude as opposed to an altruistic one.

Manage knowledge or perish

But those barriers are being toppled as firms confront new competitive demands. Clients—most significantly multinationals like DuPont—are starting to demand fixed-fee arrangements, electronic service and lower prices. Moves are afoot to allow multidisciplinary partnerships in which lawyers could share their fees and businesses with non-lawyers—most likely large accounting and consulting firms like Arthur Andersen (which is suddenly the largest legal practitioner in the world, as well as one of the world's leading practitioners of KM). As these "legal plus" organizations take shape, law firms will be forced to adhere to a more corporate-like bottom line and managerial ethos. Moreover, big law firms are getting bigger and differentiation is becoming an important issue among these megafirms. And among midsize, small and solo practices, competition for clients is always fierce.

Firms like Dickinson are quickly beginning to realize that knowledge management represents a critical way for them to manage intellectual assets, not just to remain competitive but to survive in the long term.

"How important is knowledge management to a firm? Absolutely crucial. The message is `manage knowledge or perish,'" says Larry Jasmann, practice systems manager for Washington, D.C.'s Akin, Gump, strauss, Hauer & Feld. "As the dependence on technology grows and competition among law firms gets stiffer, the firm that can leverage technology to make its lawyers smarter and quicker will win. There was a time when law firms didn't compete as directly as they do now, and lawyers are being dragged into this kicking and screaming because they don't like to think of their firms as businesses."

Earning buy-in from those "kicking and screaming" lawyers who must contribute to and use KM systems and processes is a significant hurdle, and the inability to redirect and eventually overcome such resistance is the most oft-cited reason for the failure of KM initiatives. But a number of trailblazers, such as Dickinson Wright's Harnish, Akin Gump's Jasmann, John Hokkanen of Atlanta's Alston & Bird (see Org Chart, this issue), Michael Mills of New York-based Davis Polk and Wardwell and Marvin Chavis of Winston-Salem, N.C.'s Womble Carlyle Sandridge & Rice, are showing that attorneys can be drawn into collaborative, knowledge-sharing practices—and even become enthusiastic about doing so—if implementers create approaches that demand little of users in terms of training and maintenance and offer easily recognizable dividends. These firms are setting the precedent for dynamic systems that go beyond mere automation, by allowing firms and their attorneys to capitalize on their assets as never before.

Classic knowledge workers

ACTION ITEM

NMatrix
www.nmatrix.com
(212) 338-9442

First Renaissance Ventures
(610) 989-9898

Hyperwave
www.hyperwave.com
(978) 392-2101

Alston & Bird (Pure Oxygen)
www.alston.com
(404) 881-7000

Jnana Technologies Corp.
www.jnana.com
(212) 698-7944

In many senses, lawyers are classic knowledge workers. Their stock-in-trade is information and expertise. Because law is precedent-driven, its practitioners are heavily invested in knowing how things have been done before. Many attorneys, therefore, are already oriented toward the basic premises of knowledge management, though they have been practicing it on a more individualized basis and without the help of technology and virtual collaboration. As such, the implementer's job becomes simply a question of finding the areas where lawyers are already sharing information and then backfilling nonintrusive technology, according to Alston & Bird's Hokkanen.

"You can't imagine the wonderful knowledge management systems I've seen in binders in lawyers' offices, but they're on paper," observes Hokkanen. "They're incredible resources that have been developed and maintained but await a technologist gaining access to it so that everyone can benefit."

Hokkanen has been working on formal knowledge initiatives at his 470-lawyer firm for nearly six years and is arguably one of the pioneers of legal KM. He is the first to be named chief knowledge counsel in a law firm and has written and spoken widely on technology-enabled sharing. To Hokkanen, the emergence of the Internet foretold so many opportunities for law firms that the former engineer-turned-attorney left the practice of law in 1994 to pursue Internet-based knowledge-sharing full time.

Alston & Bird: KM group by group

Alston has transformed its practice with a database-driven, Web-authoring application that fosters collaboration within practice groups via intranets and client-centered extranets. While the initiatives have grown in the last year and a half to include enterprise-wide administrative applications, focusing up front on legal practice areas was the logical starting point because it's the most efficient way of earning attorney buy-in.

"Our focus has been to create reusable objects that can then be cloned across multiple practice groups. Rather than try to find one application that meets the needs of all 30 practices, we create an application designed to meet the specific niche needs of one practice group. Once that's done, we can take the application to a different practice group, tweak it, and before you know it you have five different flavors of the same application all meeting the specific needs of the various domains," Hokkanen says.

The foundation of the system is a Web-enabled, full-text database containing half a million documents. Prior to the system, intranet page updates from lawyers were being forwarded to IS people for HTML coding. Not only was this not the best use of a Web developer's time, the process created information bottlenecks and offered no way to serve the varying needs of individual practice groups. More importantly, lawyers weren't using it.

Today, all static HTML pages are gone, and each practice group at Alston & Bird has its own Web-based forms that let lawyers, paralegals and staff easily add new knowledge and maintain existing pages. Full-text search technologies enable access to anything within the intra- and extranets, while security systems keep sensitive information secure within a specified group of users. In the four years since its debut, the firm's intranet has grown to include the following:

  • Individual practice group case matter applications
  • Expert witness profile and/or testimony applications
  • Foreign counsel tracking applications
  • An investment banker database
  • An audit letter routing/tracking groupware procedure
  • Help-desk tracking and routing
  • Summer-associate work request and evaluation application
  • Numerous individual community practice sites, such as one for all the paralegals.
The firm also has about a dozen client-centered extranets that range from transactional sites for the exchange of information and documents to litigation extranets where the firm acts as coordinating counsel among diverse and often far-flung groups of lawyers.

Davis Polk: customization on demand

Like Hokkanen, Michael Mills of New York's 525-attorney Davis Polk and Wardwell believes that one of the keys to success is making the knowledge contribution process as unobtrusive as possible (see "Legal Ease," June 1999 KMM). As at Alston Bird, Davis lawyers can submit new knowledge to the document management system without the involvement of a webmaster. The system manages the work-in-process, and lawyers contribute to it as they go about their daily tasks.

At the conclusion of each case engagement, lawyers, paralegals and librarians filter through the new additions to find the knowledge that has lasting, reusable value. That information is managed on an intranet with a product called Hyperwave. By combining the intranet with a set of tools from NMatrix that harvests relevant information such as law-related news stories, regulatory agency information or Security and Exchange Commission filings, customized information from internal and external sources can be delivered to each lawyer.

Because these knowledge-contribution processes are relatively seamless, and because they add immediately recognizable value, lawyers don't need much encouragement to participate.

High-hanging fruit

But as knowledge management in law firms begins progressing beyond first- and second-stage document management and collaboration initiatives and toward more tacit knowledge capture for expert systems development, the dividends may be less readily apparent, and attorneys may need clear directives to contribute.

Making tacit knowledge explicit often involves writing things down, and there's no magic system to make it easier, Mills says. And just as corporate KM initiatives benefit from a top-down mandate, a push from senior partners will help law firms better manage their knowledge.

"Firm management has to recognize that—if not in the near term, then in the long term—contributing to the knowledge collection is every bit as important as doing billable work," notes Mills. "The firms that have been most successful at it are those that have made it an explicit part of people's performance reviews. Management has to make the fishing and the repairing of nets of equal perceived value."

Complicated directives

Of course, top-down directives are complicated in the legal industry. In large firms the power can be spread among as many as 150 partners, most of who have different specialty areas, different work and management styles and vastly different groups under their control. Earning a consensus is not an easy proposition—especially when the funding for new initiatives is coming directly out of the partners' yearly draws. On the other hand, senior partners are the ones who have the most to gain if their firms are able to leverage intellectual assets in ways that keep lucrative clients on board and draw in new ones through new services and efficiencies.

One measure of senior management's receptivity to knowledge management can be found in its commitment to technology, says Marvin Chavis, director of technology for Womble Carlyle. While KM may be about people and processes, it doesn't happen without the technology.

"If you've got a firm that isn't committed to its technology, then there's only so much that can be done in knowledge management, other than manipulating the manual systems they've always had in place," says Chavis. "But those who are aggressively using and developing technology as a tool, well, one of the first things they're going to focus on are the information stores that the lawyers need and can use in their practices."

Which is what Dickinson Wright's Harnish experienced when he arrived at the firm in 1996. Brought in to implement collaboration and sharing via Lotus Notes, his first project ended up being a complete overhaul of the firms' infrastructure so that it could better accomplish its goals. Harnish purged the firm of 9 of its 11 different operating systems, drastically cut down on the various and sundry software applications from 26 different vendors and updated the legal software programs. Today, the firm runs on two operating systems—one type of laptop and one brand of desktop. The overhaul wasn't cheap by any means, but it showed that the partners were committed to a collaborative culture. And, Harnish believes that today, because of the efficiencies uniformity brings and because the firm now relies less on tech consultants, per-partner spending on technology is lower than when he arrived at the firm.

Akin Gump: KM top priority

Akin Gump is undergoing a similar transformation as the whole firm is in the process of switching over to a Microsoft NT server and reconfiguring to meet Y2K requirements. Jasmann and CIO Sally Gonzalez were brought in to specifically address strategic uses of technology, and while not as far along as a Davis Polk or Dickinson, Jasmann claims Akin's top tier has declared knowledge management to be their number one priority for the next two years.

"The thing about Akin Gump is that it's a very entrepreneurial firm. Management has figured out that leveraging intellectual assets is extremely important for the future," Jasmann says.

That attitude puts the firm among the leaders in the field, according to Jon Klemens, president and chief operating officer of First Renaissance Ventures, a Radnor, Penn.-based investment advisory and financial services firm. Klemens estimates that less than 10 percent of firms really understand the importance of these issues and, as a result, lag behind other industries.

"In law firms, there's rarely ever the business connect where they view, like other professional services groups, their knowledge as an asset," Klemens says. "Arthur Andersen's Knowledge Enterprise group has a very specific business plan in place in which they try to develop knowledge and content, invest in it and repurpose it. That's a $200 million investment versus most law firms trying to figure out how to invest in a document management system."

And Andersen's KM investment could prove to be a huge threat to law firms in the future. The American Bar Association recently proposed allowing multidisciplinary practices—which would allow lawyers to share fees and businesses with non-lawyers like AA's tax groups—and while the proposal was tabled at the annual meeting in August, the issue has not, by any means, been dropped.

Next wave

For the firms that have already embraced knowledge management, the next wave will likely include a stronger focus on client-facing extranets and the development of expert systems. Jasmann describes extranets as essential for ensuring lasting relationships with clients, not only because they increase a client's access to their counsel but because the firm "gets linked so tightly with the client that they'll never let go."

Expert systems are showing huge efficiency returns (see sidebar) and hold promise for much of the transactional work—tax matters, real estate closings, financial closings—that make up the bulk of legal services. Capturing the knowledge upon which the systems are based is a more complicated process than setting up collaborative systems among practice groups. But the payoff potential is huge if firms like General Electric can use the system to cut a 30-day work process down to 15 minutes. And because GE and other corporations are realizing such efficiencies within their own legal departments, they are putting pressure on outside firms to do the same—at the risk of losing their place on the list of outside law firms affiliated with the company.

There are those who have worried that expert systems like GE's virtual patent advisor will ultimately be used to replace lawyers with technology, but Davis Polks' Mills, who is developing some of these systems with tools from New York-based Jnana Technologies, scoffs at the idea.

"If the particular problem has become so sufficiently routinized that I can build an expert system to handle it, or if we can employ a document assembly program to draft documents, then it's time for the lawyers to move on to higher value tasks. I'll take all the associates I can get," Mills concludes. "The goal is leveraging, not replacement."

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